Short Sales - Increase the Odds of Closing with Experienced Professionals
A short sale is when a homeowner is trying to sell the home "short" of foreclosure, and the term "short sale" is extremely misleading and, really, is anything but that! They take time and can be very frustrating. And, only a small number even close. According to an August 2010 article in Bankrate.com, 1 in 5 offers turn into short sale closings. 20%!?? With numbers like that, it makes you wonder why even bother?? But, for those who are patient and have their ducks in a row, a short sale, for all of its challenges, can be an excellent way to buy a home.
What are the challenges to a short sale and how can you overcome them?
Challenge #1: Too many cooks in the kitchen. There are more parties involved in a short sale than in a normal purchase. You have the seller's lender who must approve the transaction. If the seller has a second mortgage or other liens against the house, that lender(s) will be involved. There may be private mortgage insurance on the seller's loan, which requires the insurance company to approve the transaction. Then, there are Realtors, the buyer's lender, appraisers, inspectors, and the title company. With so many people involved, you can see why just one hiccup can bring the transaction to a halt, or at least delay it.
Challenge #2: Changing numbers, disclosures, and paperwork. Throughout the process, numbers usually change. Perhaps the offer is too low for the seller's mortgage holder. Perhaps the mortgage insurance company requires the seller to commit to a promissory note to help defray some of the loss claim. Or even more elementary, it may be that some paperwork is missing or not returned in time, setting the process back.
Challenge #3: Uncertainty of closing. A buyer goes into a short sale unsure of whether it will go through. It depends purely on economics. Do the numbers support the "hardship" of the seller's financial situation? If not, the short sale won't be approved. For that reason, although a buyer may want to buy the short sale property, they often keep looking and may find something else in the meantime that can be closed on more quickly.
Challenge #4: Overwhelming volume. It's estimated that 11 million homes at the end of 2010 were underwater, making the short sale a growing last resort for many who simply cannot afford to stay in their homes, but do not want to experience foreclosure. The volume is immense and the process is complex.
Real Estate PROFESSIONALS are key to successful short sale closings
For such a complicated transaction, it's imperative that a buyer work with professionals who have done short sales before and can react quickly to meet deadlines or changes as they occur. They also must understand the process thoroughly so they can work through the complexities and communicate clearly with the seller and the seller's lender. That requires experience.